Credit Cards

Are Premium Credit Cards Worth The High Annual Fee?

Are Premium Credit Cards Worth The High Annual Fee?

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Does it ever make sense to pay hundreds of dollars for a credit card? Turns out the answer is ‘yes’. We explore why and when people can actually benefit from a credit card charging them $450 annually.

Most people shy away from fees. The mere mention of the word typically comes with a set of negative connotations – especially when it comes to credit cards. In a survey of consumer habits, 43% of respondents said a ‘No Annual Fee’ card is best for them. Therefore, it may come as a shock to many readers to know that some people pay as much as $2,500 per year to hold certain cards.

High annual fee credit cards, commonly referred to as "premium cards", can have tremendous value. However, this won’t hold true for all people. Premium credit cards typically come with high-end perks that would cost an arm and a leg otherwise -- this is what often causes these cards to land on "best"-type lists. Therefore, cardholders can break even, if not come out ahead, despite the high fee.

Here are some of the most common benefits that come with premium credit cards, and how you should think about the value they present.

Lounge Access

Many of the premium cards offered by major U.S. credit card issuers give complimentary access to airport lounges. We estimated this to be worth roughly $450 alone.

Individuals who travel frequently, whether for work or leisure, know the benefits of airport lounges. These secluded spaces give members access to special amenities – everything from showers to conference rooms. People who call an airport their second home are sure to be tempted by the luxury lounges can provide. Airports are not typically very relaxing spots. Many have few comfortable seats, overpriced food, and limited outlets. It's easy to see why a lounge can seem like an oasis.

Unfortunately, airport lounges don’t come cheap. You can buy one-time passes or annual memberships for access. The latter typically cost in the neighborhood of $400 to $500, depending on the brand.

If you were already planning to purchase access to a lounge separately, a premium credit card can be one way of getting around the cost.

Pre-Sales & Promotions

Banks typically treat their premium credit card customers as VIPs. Individuals holding these cards tend to be high spenders, which makes them valuable to the issuer. As result, banks will try and send out special promotions and pre-sale ticket opportunities to these members.

Recently, The Platinum Card® from American Express—which has a $550 annual fee—gave cardholders a chance to buy tickets to the musical Hamilton at face value. Over the past few months, the show has been a runaway hit, and it’s been near-impossible for people to get their hands on tickets -- let alone at a low price. Scalpers have been selling them online at incredible mark-ups. A $200 seat available to American Express cardholders was, at the time, selling for over $2,000 on websites like StubHub.

For rates and fees of The Platinum Card® from American Express, please click here.

Status Upgrades

Some premium credit cards give cardholders automatic elite status with certain hotels or airlines. This is another benefit that frequent travelers will appreciate. Elite status often qualifies individuals for free room upgrades, and other preferential treatment, such as late-checkout or early boarding.

Why is this a big deal? Unless you are a business traveler, qualifying for elite status on your own can be a huge hassle. To reach Diamond status with Hilton hotels, for example, you need to book 60 nights within one calendar year. Since most people don't spend 16% of the year in a Hilton hotel room, using a credit card can be a great way to shortcut the requirement.

Do The Math

Like we said in the opening, not everyone will benefit from premium credit cards. In fact, most people are likely correct to shy away from them. However, the decision of whether to pay $450 per year for a credit card should be a well-informed one. Don’t simply assume that paying the fee would put you at a loss.

As with all credit cards, take the time to evaluate the pertinent benefits you’ll receive. If a card offers lounge access, ask yourself "is this something I would buy anyway?" If so, subtract the value of the lounge access from the annual fee. Repeat that for all other benefits that come with the card to get its true cost. If at the end of the calculations you find that the card would be a net positive on your finances, consider applying.

This may be more difficult of an exercise for the qualitative benefits, such as pre-sale access. In these instances, you will need to make a judgment call as to how much you personally think these perks are worth.